Augmented and Virtual Reality Markets Set to Explode

Reality Devices Could Combine for $150 Billion in Sales by 2020.

The buzz around augmented reality (AR) has exploded this year thanks to the success of the smartphone game Pokémon Go.

The app lets players find and catch in the real world characters from Nintendo’s long-running Pokémon game. When they find a Pokémon, players can enter an AR mode that lets them see their target on their phone screens, superimposed over the real world.

Pokémon’s popularity has shone the light on AR and virtual reality (VR) and their less known cousin mixed reality (MR). But what are the distinctions between the three?

While AR maintains users’ connection with the real world and adds digital information or data to it, VR is immersive and persuades users that they have entered a new reality through the use of headsets like Sony’s Morpheus, or Facebook’s Oculus Rift that block out the real world.

AR is often delivered through a sensor-packed wearable device, such as Google Glass, the Daqri Smart Helmet or Epson’s Moverio brand of smart glasses and Microsoft’s HoloLens headset glasses (which is also considered as an MR technology). Many analysts believe the potential market for AR applications is much larger than VR’s.

MR, the least-well-known of the trio, combines the best aspects of both VR and AR to produce new environments where physical and digital objects co-exist and interact in real time. Google has also invested heavily in Magic Leap, considered as a future MR technology, while Microsoft is doing the same for the HoloLens.

Pokémon Go has done much for consumer acceptance of VR/AR/MR. As Apple CEO Tim Cook put it: “AR can be really great. And we have been and continue to invest a lot in this. We are high on AR for the long run. We think there are great things for customers and a great commercial opportunity…it will be huge.”

AR and VR companies have closed funding rounds totaling $2 billion over the twelve months ending June 30 2016, according to new data from Digi-Capital. In addition, industry analyst CCS Insight forecasts 2.5 million VR and AR devices will be sold this year, rising to more than 24 million device sales in 2018.

Tim Merel, managing director of Digi-Capital, believes both the AR and VR markets will become mainstream by 2020. The company forecasts AR devices will become a $90 billion business by 2020 while VR will generate $30 billion in the same period.

In an Aug. 15 report for IDC, Tom Mainelli, its vice president for devices and AR/VR, noted new, less expensive hardware will put virtual and augmented reality technology within the grasp of a growing numbers of companies and individuals.

Applications for augmented reality are broad and include navigation, sightseeing, military and medical – everything from AR goggles that can integrate maps and weapon control systems in the field of battle to CT scan doctors can project while they are operating. Retailers like IKEA have released VR apps, while Lowes is installing Holoroom kiosks which apply virtual reality to home design.

However, AR’s potential remains limited by a highly fragmented ecosystem of hardware platforms and operating systems that limit adoption. The key challenge is to make the technology plug and play so that the industry gets past the early adopters.